Answer to Obamacare cuts: Less coverage

Trump administration officials, looking at the possible impact of large insurance premium increases for millions of next year’s Obamacare customers, want more people to consider plans with less generous benefits and high deductibles.

The agency that oversees the ACA announced early this month that it would expand eligibility for “catastrophic” plans sold in Affordable Care Act online marketplaces. The plans require people to spend more than $10,000 a year on deductibles before the policies pay most medical costs but carry lower monthly premiums than other Obamacare policies.

The move reflects growing concern among Republicans about political backlash if Congress doesn’t extend larger tax credits put in place during the covid-19 public health emergency to help consumers pay their premiums. The extra subsidies are set to expire at the end of the year, resulting in an average 75% increase in the amount people pay for coverage, according to KFF, a health information nonprofit that includes KFF Health News.

A small, bipartisan group of House lawmakers introduced legislation to extend the enhanced covid-era subsidies for one more year, which would keep them in place through midterm congressional elections in fall 2026.

But the fate of that legislation is uncertain, with many Republicans opposed to extending the extra tax credits, with a permanent change costing at least $335 billion over 10 years. Without an extension, tax credit amounts would revert to prepandemic levels.

“They spent the last 15 years against the ACA, so a lot will be steadfast, but others are worried about the effect of massively spiked premiums on their constituents,” noted a Democratic Senate staffer who asked not to be identified because they weren’t authorized to speak to the media.

Republicans currently control Congress by slim margins, raising the stakes if voters who lose their ACA tax credits blame them at the ballot box.

Catastrophic plans are a little-known type of Obamacare policy that have previously been limited mainly to people under age 30. While they come with lower monthly premiums than other types of ACA plans, the coverage has higher annual deductibles, which are set at the outof-pocket maximum for the year: $10,600 for individuals in 2026 or $21,200 for families.

A deductible is the amount patients must spend on health care before insurance plans pay for most services. Catastrophic plans do cover three primary care visits a year without having to pay the full deductible and, as with other ACA policies, policyholders pay nothing for preventive services such as some cancer screenings and vaccines.

The catastrophic plans will automatically show up on the federal marketplace, healthcare.gov, for consumers who lose tax credit coverage entirely next year due to their household income. Another category of consumers - people who continue to qualify for tax credits but not for subsidies that reduce out-of-pocket costs - may also be eligible but would have to send in paperwork.

“By expanding access to catastrophic plans, we are making sure hardworking people who face unexpected hardships can get affordable coverage that protects them from devastating medical costs,” Centers for Medicare & Medicaid Services Administrator Mehmet Oz said in a statement.

It isn’t clear whether the policy changes will make the plans more attractive to consumers. Catastrophic plans aren’t available in all states, and the size of the deductibles can be off-putting.

“It’s a ton of money,” said Louise Norris, a health insurance analyst and broker who writes regularly about the ACA. “A full-price catastrophic plan is still more expensive than some people can afford, but they’re doing this to offer a slightly more affordable option.”

Catastrophic plans have had limited appeal, with only about 54,000 out of Obamacare’s 24 million enrollees currently opting for the coverage, according to government data, Norris said.

“Uptake has always been quite low,” said Katie Keith, director of the O’Neill Institute’s Center for Health Policy and the Law at Georgetown University. “It’s not a bad option if it is the only option you have. I question whether consumers are looking for this kind of coverage.”

CMS plans to grant people a “hardship” designation to enroll in catastrophic plans if they lose eligibility for ACA tax credits next year. Most likely to qualify are people earning more than four times the federal poverty rate ($62,600 for an individual this year, or $106,600 for a family of three), who will lose access to all premium subsidies if Congress does not extend the current enhanced tax credits. It’s also unclear how much premiums will cost. Insurers, reacting to the new administration guidance, might seek to recalculate their rates based on what they estimate may be an influx of older people into the plans, Norris said.

AHIP, the insurance industry lobbying group, is pushing hard for the larger tax credits to be extended. It did not comment specifically on how the new guidance might affect catastrophic health plan premiums. Still, AHIP spokesperson Chris Bond said that “while catastrophic plans can provide important coverage for specific needs, they are not a replacement for affordable comprehensive coverage.”

There are other hurdles. Norris said insurers don’t offer plans at all in 10 states: Alaska, Arkansas, Indiana, Louisiana, Mississippi, New Mexico, Oregon, Rhode Island, Utah, and Wyoming. And where they are available, options are few. This year, for example, a 25-year-old in Orlando, Florida, had a choice of 61 “bronze” plans, the cheapest level of coverage available to all ACA shoppers, but just three catastrophic plans.

Policy experts say the expanded eligibility for catastrophic plans makes it more important than ever for consumers to consider all options when shopping for ACA coverage during the annual open enrollment period, which starts Nov. 1. In addition to the catastrophic and bronze plans, there are also “silver” and “gold” plans, each with varying premiums and deductibles.

Bronze plans have the lowest premiums but the highest deductibles; the average bronze deductible this year is $7,186, which is still lower than the catastrophic plans, according to KFF.

Catastrophic plan deductibles, while high, are comparable to some bronze plans, Norris noted. People who choose catastrophic plans are not eligible for any ACA tax subsidies to help pay monthly premiums.

A pending court battle may provide lawmakers concerned about voter pushback on Obamacare changes an unintended reprieve.

In late August, a federal judge in Maryland temporarily put on hold some changes the Trump administration had ordered for next year. Those changes, included in a June regulatory filing by the administration, would have added additional verification paperwork requirements for some people enrolling in ACA plans, and were challenged by several cities, which cited government estimates that the changes could cause up to 1.8 million people to lose their insurance in 2026.

The court ruling stayed several provisions of the Trump administration rules,including income verification requirements that would affect people below the poverty level and those without tax return information. The move also paused verification requirements affecting people who apply outside the annual open enrollment period and blocked a $5 monthly charge for people who are automatically enrolled into plans in which subsidies cover the entire premiumunless they contact the marketplace and confirm their selection.

The Trump administration is appealing the decision, but the case may not be settled until next year, said Keith at Georgetown University.

That makes it likely that the pause of the new requirements will stay in place for this year’s open enrollment season.

Keith said the ruling was a “bigger deal” than expanding eligibility for catastrophic plans. “Consumers all across the country won’t have to deal with red tape the Trump administration rushed to put into place ahead of the new plan year,” and the ruling also “helps people keep their coverage.”